EN­ERGY

Business Daily (Kenya) - - EDITORIAL & OPINION - Ad­vo­cates There are no land laws or reg­u­la­tions speci ic to pas­sage of pipe­lines

ANACIATA MBULA

As­so­ciate, Com­mer­cial De­part­ment, Oseko & Ouma

As the re­al­ity of the com­plex­i­ties in­volved in oil and gas ex­plo­ration and pro­duc­tion set in, it is be­com­ing ap­par­ent to both the gov­ern­ment and the pop­u­la­tion at large that this newly dis­cov­ered com­mod­ity in Kenya takes a whole lot of ef­forts to com­mer­cialise than pre­vi­ously hyped.

The first ef­fort to build a pipe­line for oil trans­porta­tion in Kenya was frus­trated when Uganda pulled out of the an­tic­i­pated joint pipe­line con­struc­tion with Kenya, favour­ing Tan­za­nia in­stead. In 2016, the gov­ern­ment an­nounced an early pro­duc­tion to be ef­fected through road trans­porta­tion.

This, how­ever, did not ac­tu­alise at the re­al­i­sa­tion that the Kenya’s crude oil is waxy and sticky in na­ture, and there­fore needs to be trans­ported in a heated form. This is not the only bar­rier to trans­porta­tion of oil by road. Se­cu­rity, good in­fra­struc­ture, risk to hu­mans and en­vi­ron­men­tal is­sues are also im­por­tant con­sid­er­a­tions to make.

Head­way, how­ever, has been made in a Sh210 bil­lion deal signed on Oc­to­ber 27, 2017 be­tween Tul­low Oil and the gov­ern­ment for joint con­struc­tion of a heated 865 km pipe­line to run be­tween Lo­kichar and Lamu.

Look­ing at this nar­ra­tive, it is ap­par­ent that land law is truly the hero for oil ex­plo­ration and pro­duc­tion. There are no land laws or reg­u­la­tions spe­cific to pas­sage of pipe­lines. There­fore, Tul­low and its part­ners Maersk and Africa Oil will have to rely on the ex­ist­ing land laws. To a large ex­tend, the pipe­line will pass through pri­vate prop­erty, mak­ing usual con­veyanc­ing pro­cesses ap­pli­ca­ble.

The pro­jected 2021 time­lines for com­ple­tion will only be at­tain­able if the con­veyancers in­volved are alive to per­ti­nent is­sues in trans­porta­tion of hy­dro­car­bons. A pipe­line once af­fixed to the land be­comes part of im­move­able prop­erty there­fore re­sult­ing to com­pet­ing in­ter­ests be­tween the oil com­pany and the land owner. From the face of it, it looks as though ab­so­lute own­er­ship of land by the oil com­pany re­solves this. How­ever, own­er­ship poses crit­i­cal chal­lenges; firstly, it is not con­ve­nient for land own­ers to trans­fer only strips of land to the pur­chasers. The oil com­pany on its part is also at a loss on what to do with those strips once pro­duc­tion ceases.

Sec­ondly, land own­er­ship comes with con­tin­u­ing bur­dens such pay­ment of land rent and rates that the oil com­pa­nies may not be keen on tak­ing up. Lastly, land ac­qui­si­tion is a cum­ber­some and costly process mak­ing it com­mer­cially bur­den­some for the oil com­pany. Usu­ally, pipe­lines utilise what are tra­di­tion­ally known as ease­ments. A mix of leases and land own­er­ship will ap­ply for a few parcels which will house the more fre­quently used fa­cil­i­ties such as stor­age/ ob­ser­va­tion ports and of­fices, but ease­ments will run for the bet­ter length of the pipe­line.

An ease­ment al­lows the oil com­pany to ac­cess, re­pair and main­tain the pipe­line, to pre­clude in­va­sive ac­tiv­ity on the pipe­line and also to safely aban­don the pipe­line when pro­duc­tion ceases.

How­ever, ease­ments also pose var­i­ous chal­lenges. The regis­tra­tion of ease­ments cre­ates two types of real rights, be­ing; dom­i­nant rights and sub­servient rights. An ease­ment be­ing the sub­servient right, or in other words the bur­dened land, must ex­ist for the ben­e­fit of an­other par­cel of land, which will be the dom­i­nant ten­e­ment.

There­fore, for an oil com­pany to hold an ease­ment, it must first own, as a pro­pri­etor, a par­cel of land which the ease­ment will serve.

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